Interview: Per Eriksson, CEO, NetEnt
Published 12th January 2015
You have generated stellar revenues and profit growth over the last reported quarters. What has been driving this?
We launched quite a lot of new initiatives last year, and we also entered the UK, where we have signed up a lot of new operators. So the growth has been coming from live casino, our mobile platform, our new games, new customers within the UK, and of course new customers in other geographies as well. However, there is still much more to do in the UK. We are still only on single digit market share after Q2, as far as I know, so we still have a way to go, which is nice to know.
Are you anticipating much impact from the forthcoming UK point of consumption tax, or will this be mitigated by the underlying growth?
We still see growth coming from many areas, including the UK, and from new geographies. For example, Spain is now regulating, so in the first half of 2015, we will start to get traffic from that market that we haven’t had before.
How is the business structured in terms of offices/locations, employees and their specialisms?
Stockholm, where we do most of the development, is the largest office, with approximately 350 to 400 people. But we are growing rapidly, so if I give you one number today, it will be a different one tomorrow! Then we have Malta, where we have somewhere between 130 and 160 people, and do most of the sales and marketing. Some of our product licensees are also based there, so we take a lot of the ideas our customers have, start to create games for them, and then we develop them in Sweden. The live casino studio is also in Malta.
Innovation and creativity have always been important drivers of growth for NetEnt. How do you ensure the continuation and fostering of this culture throughout the company?
We know that other people are copying our games, because they are successful, and we know we are driving the online casino market, because our games are superior to many others’. We are used to that. Our way of staying ahead of the competition is to always push ourselves to the next level, to always strive for our next game to be better than the previous one. That’s what we are aiming for, all the time. We never sit back and think, “We have done a good job now, let’s just continue to do that.” We are not afraid of taking new steps, creating games which are different and use new technology. This was demonstrated earlier this year when we launched our Alien slot, which uses real-time 3D graphics.
Approximately how much of your revenue is driven by slots compared to the other products?
In Q2, 84% of our revenue came from slots. The next biggest area is table games. If we look at the different markets, table games are more popular in the UK than Scandinavia, for example, where slots are very popular.
You have various licensing agreements in place with Universal and 20th Century Fox, among others. How do these slots perform compared to their non-licensed counterparts? Do they tend to gain traction more quickly?
Branded games are a very good tool for bringing in new customers into the casino, but existing players are also curious. If you are a South Park fan, you feel you have to test the South Park game! With branded slots, we always have high traffic in the beginning, and then depending on how good the game is, it settles at a certain level. We saw a lot of traffic from the South Park slot when that launched, and launched a second South Park title on October 23rd.
You recently announced your entry to the North American markets in 2015. How will your strategy differ there compared to that in Europe?
Online casino is currently only allowed in New Jersey and Delaware, so we will start in New Jersey. We see our content as superior to that on offer in New Jersey today, so we are very confident the players will really like what they see when we launch our games there next year. There are a lot of conservative people from the land-based industry that are doing their upmost to keep online away, but it will come, and it’s just a matter of time when we see more states opening up. The next states will most likely be Pennsylvania and the more liberal East Coast states, and also California, but it’s hard to predict exactly when that will happen. Some states will never open to online casino, such as Utah, but we are confident the most important, and largest, will come online sooner or later.
How much of your business is now being driven via mobile devices, and how do you expect this to grow over the next 12-24 months?
We reported in Q3 that 16.5% of revenues came from mobile games, and we continue to have fantastic growth and that figure will no doubt rise over the coming quarters. The nice thing is that we aren’t seeing any impact on desktop revenues, as these are continuing to grow.
So you haven’t yet seen any cannibalization of desktop revenues by mobile?
No, not yet, it will do one day for sure, but the thing is that if you are at home, you tend to prefer the bigger screen and the higher quality sound you get on the desktop. Mobile devices are getting bigger and more powerful, so they will take over one day, but not 100%.
You also develop lottery-style games. Will this be an increased focus for you going forward, or will it remain complementary to the core business?
It’s more of a supplement, but also when we go into World Lottery Association (WLA) markets, we will see it take on greater importance than in normal online casino markets. It’s good to have these products in our portfolio, and we hope to see an increase there as well. Our agreement with GTECH, which is one of the main suppliers to the WLA, means we can now access markets we have not been able to address before. We have an agreement with Lottomatica in Italy, and through our partnership with GTECH, we hope to see many more lotteries offer our games. It will take some time, but having a door opened for us by GTECH is very good.
You launched live dealer casino around 18 months ago, as a relatively late entrant to the market. How is this performing?
It’s performing well, in line with our plans. It’s growing steadily, but being second mover and coming in a little bit late, it takes some time to get everything going. We have signed up quite a lot of new customers, and not all of them have launched yet, so we will see continued growth in that area. We are very pleased with our product, because it’s technologically more advanced than the competition. That’s the advantage of being a second mover. The disadvantage is that all the customers have signed up with the first movers, but we see there is a market, and that we can stand side to side with our competitors.
“In the UK, we are still only on single digit market share after Q2, so there is still much more to do there.”
“We know that other people are copying our games, because they are successful, and we know we are driving the online casino market, because our games are superior to others’. We are used to that.”